316. The poverty trap

Poverty is not as easy to define as you may think prima face. For me, the best definition is probably not having enough financial resources to cover one’s basic needs, which, if we use Maxwell’s pyramid, are physiological and safety needs, the resources necessary to live with dignity and security, without constant worry of running out of funds. So understood, poverty can affect both people and businesses, and it is a trap, a situation in which you are pushed to make bad decisions, worsening your prospects by trying to stay afloat. You may take out short term, abusive lending, paying today’s bills but further undermining your precarious position. You may take on the wrong investor, if you are a business, or abandon an interesting course, if you are a person. Our system has perfected the poverty trap, with a range of benefits which prevent unsightly starvation but also financial recovery. Best way to avoid it? Don’t enter it in the first place, little consolation for those already in it

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